CannabisNewsWire
Editorial Coverage: As the cannabis market continues to grow,
hemp and cannabidiol (CBD) are occupying an increasingly large
share of the escalating industry.
- Hemp, the form of cannabis without psychoactive
tetrahydrocannabinol (THC), is an important part of the cannabis
market.
- Hemp is common in many health and wellness products.
- Total sales of hemp-derived products are expected to exceed $1
billion this year.
- Some industry experts expect hemp products to soon exceed
marijuana for their share of the cannabis industry.
Sugarmade, Inc. (OTCQB: SGMD) (SGMD
Profile) is taking advantage of this shift by making a
heavy investment in hemp production. Medical marijuana company
Tilray, Inc. (NASDAQ: TLRY) bridges the gap
between product types through its production of CBD oils. One of
the largest cannabis growers in Canada, Canopy Growth Corp.
(NYSE: CGC) provides plants used in a wide range of
products. GW Pharmaceuticals Plc (NASDAQ: GWPH)
has created the first cannabis-derived prescription drug approved
by the U.S. Food and Drug Administration. Meanwhile, public
acceptance and more positive perception of the cannabis sector are
shifting, thanks at least in part to publicity efforts by shifted
by cannabis companies such as Aurora Cannabis, Inc. (OTCQX:
ACBFF) (TSX: ACB).
To view an infographic of this editorial, click here.
The Two Sides of the Cannabis Market
It’s all too easy to view the cannabis sector as a single market
providing variations on the same product. In reality, it’s an
increasingly complex and varied industry. Its primary plants and
products can be divided into two groups: marijuana (and THC) in one
category, and hemp (and CBD) in the other.
The marijuana piece of the cannabis market is the one more
traditionally recognized. In this space, plants grown, cultivated
and used contain THC, the psychoactive ingredient that gets drug
users high. THC is the reason for cannabis’ ongoing popularity as a
recreational drug worth hundreds of millions of dollars in both
legal and illegal markets.
The other side of the market is centered around hemp. Hemp does
not contain THC; rather it contains CBD, an active ingredient found
in other cannabis plants. CBD has fueled the development of medical
marijuana applications, but alternative products that utilize the
substance are increasingly popular in the health and wellness
markets, where they can be bought more widely than medical
marijuana. As a result, some industry experts note that hemp may
soon make up the larger part of the cannabis industry.
The Growth of the CBD Market
Though less well-known outside of specialist markets, CBD is
becoming a more accessible way to benefit from cannabis. This has
led to investment from companies across the cannabis sector,
including Sugarmade, Inc. (OTCQB: SGMD).
Sales of hemp-based products in the United States reached $820 million last year, of which $190 million,
or 23 percent of sales, consisted of CBD-derived products,
according to Hemp Business Journal. That total for hemp is
expected to pass a billion dollars this year.
Predictions for the future are even more promising. The same
Hemp Business Journal article estimates that the hemp
market will reach $1.9 billion in the United State by 2022, with
$646 million of that coming from CBD and its derivatives. The Brightfield Group is even more optimistic in its
assessment. The group’s industry specialists believe that CBD could
outstrip the rest of the cannabis sector in size in the next few
years.
For companies such as Sugarmade, whose business is closely tied
to CBD, these developments create opportunities for expansion and
innovation.
CBD Enters the Mainstream
A wide variety of end-use product potential is helping hemp gain
mainstream use and acceptance. This market includes supplements,
personal care products, textiles, and food and industrial
applications, as well as CBD and the support services provided
Sugarmade and other similar companies.
The hemp market has grown 15 percent per
year over the past few years. Unlike marijuana sales, this
growth isn’t driven by the medical and recreational sectors.
Instead, body products and supplements have been key factors. Much
of the hemp for these products has been imported from Canada and
China, with imports totaling $78.2 million in 2015, not counting
textiles, paper products or construction materials.
The hemp market is expected to be strengthened by the2018 Farm
Bill currently making its way through the U.S. Senate. Legislation
included in the act, supported by the Senate majority leader, would
remove industrial hemp from the Controlled Substances Act, making
it easier for farmers to grow hemp for CBD and other agricultural
purposes. Since the last farm bill was passed four years ago, some
farmers have been able to legally set up test production of hemp
for CBD, but widespread cultivation has not been permitted.
The extent of the change permitted by the expected agricultural
law remains
uncertain. Other issues unrelated to cannabis are currently
holding up the Farm Bill, despite widespread bipartisan support for
the hemp provisions. Once the bill passes, the impact for CBD will
also depend upon decisions made by state authorities and the FDA.
But the bill will certainly ease the way for potential hemp growers
in states that support the CBD industry. Until now, national law
only allowed the growing of hemp and harvest of CBD in state pilot
programs and for academic research; in the 2018 Farm Bill, those
limitations are eliminated.
Clearly, The legalization of hemp and CBD on the federal level
will only benefit companies such as Sugarmade. Previously, access
to financial and support services could be difficult for companies
working in the cannabis sector. Marijuana retailers had to resort
to cash payments or newly developed electronic systems because
banks feared doing business with companies defying federal law.
Making hemp legal will allow a wide variety of support systems to
evolve.
Innovating with CBD
The success of companies such as Sugarmade that are working in
the CBD space comes in large part through innovation. These
companies recognize the need to research, offer, and implement new
products, services and investments to drive growth.
New products will take CBD into new commercial categories.
Hemp-derived beverages and pet foods are both
on the horizon. Medicines are being tested. Paper, cloth and
construction are also industries that stand to benefit from
additional hemp offerings.
Sugarmade’s success comes through expansion in hydroponics, the
company’s entry into the cannabis space. Hydroponic equipment is
key to cultivating cannabis and, as a result, hydroponic companies
have seen substantial growth over the past few years. Sugarmade is
building upon its existing growth by acquiring two
other hydroponics companies, a move that turned the company
into one of the leading players in hydroponics. This move is also
expected to raise Sugarmade’s revenues next year from $30 million
to $75 million as the market for hemp and its support services
grows.
Sugarmade has also reinforced its position in the market through
more direct investment in CBD. The company recently committed to
investing a million dollars in Hempistry, Inc.
The investment is targeted to support Hempistry’s work on an
ultra-high CBD-content hemp strain being grown in Kentucky. It also
positions Sugarmade to profit directly from the staggering growth
in CBD.
The impact of the hemp industry extends beyond the United
States. Sugarmade has made moves into Europe as well, selling hydroponics in the United Kingdom. While the
current hemp market in Europe is small, savvy companies are
evaluating opportunities to get in now. Where America leads, Europe
is likely to follow, which means the road towards legalized
cannabis and a thriving CBD market may be imminent.
Cannabis Competitors
A number of companies are competing for a share of the CBD
market.
For medical marijuana company Tilray, Inc. (NASDAQ:
TLRY), CBD is a natural extension of its other work. The
company has developed CBD oil for medical use and is one of the
first to sell such a product into the United Kingdom after top
politicians intervened to make CBD available for treating rare
childhood forms of epilepsy. A strong program of research and
development has led to growth for the company, which is now making
initial public offerings in the United States and
Canada to finance further work.
Canopy Growth Corporation (NYSE: CGC) is one of
the largest cannabis companies in Canada, a leading market for
cannabis and CBD. With 5.6 million square
feet of growing space spread across its facilities and
subsidiaries, three-quarters of it licensed by Canadian
authorities to grow cannabis, Canopy Growth has become a powerhouse
within the industry and is breaking new ground for cannabis
companies, having completed the first legal transfer
of cannabis from Canada to the United States using a DEA-issued
permit. This transfer, for medical research purposes, seems to
reflect a softening of DEA attitudes as the agency adjusts to the
changing status quo.
Medical cannabis research is also important to GW
Pharmaceuticals Plc (NASDAQ: GWPH). The company created
the first cannabis-based
prescription medicine to gain FDA approval and continues to
innovate through its research and product divisions. Like Tilray,
the company is committed to growth, having recently announced new shares to raise $300 million of
finance.
Aurora Cannabis, Inc. (OTCQX: ACBFF) (TSX: ACB)
isn’t just selling its own CBD-rich health and wellness products —
it’s also working to raise the public profile of the cannabis
industry. It has partnered with Elevate, the annual citywide
Toronto festival, to create tracks discussing cannabis and health
issues. These events will encourage discussion about the health
potential of CBD and marijuana, as both sides of the industry
continue to gain in size and public recognition.
The cannabis industry has seen huge growth over the past decade,
and now it’s going through big changes. Commercial CBD and hemp,
until recently existing in the shadow of medical cannabis and
recreational marijuana, could soon be the leading products in a
growing global market.
For more information on Sugarmade, visit Sugarmade, Inc.
(OTCQB: SGMD)
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